Dissecting America's $3 Trillion Medical Bill

Dissecting America's $3 Trillion Medical Bill

In "Bitter Pill: Why Medical Bills Are Killing Us," a 26,000-word investigative piece in TIME magazine, journalist and entrepreneur Steven Brill catalogues the myriad reasons for America's skyrocketing healthcare costs, from extravagantly paid administrators at nonprofit hospitals to bloated bills for hospital care. And Obamacare, he argues, won't do much to solve the problem.

This is SCIENCE FRIDAY. I'm Ira Flatow. Do you know that what the number one reason for people filing bankruptcy in this country is? What's the number one reason? Not a lost job. It's not damage from earthquakes or floods. It's medical bills. My next guest says our high-priced medical treatments are responsible for some 60 percent of personal bankruptcies. And if you think you're safe because you have insurance, he says think again.

The Affordable Care Act does include a clause to prevent less well-off folks from having to pay hospital bills' full price rates, like $77 for a box of gauze. But that provision still hasn't taken effect. More than three years after Obamacare was signed into law, it still has not taken into effect. Why not?

Here to talk about it is Steven Brill. He's author of "Bitter Pill: Why Medical Bills Are Killing Us," a special report in TIME Magazine. And he's writing a new series on Obamacare for TIME. He's co-founder and CEO of Journalism Online. Welcome to SCIENCE FRIDAY.

STEVEN BRILL: Thank you.

FLATOW: I mean, your piece, "Bitter Pill," is packed with shocking statistics like this one: We spend as much on health care every week as we did on Hurricane Sandy's cleanup, $60 billion every week.

BRILL: Yeah. And rising.

FLATOW: And the evil villain in your story is this mysterious document called the chargemaster. What is that?

BRILL: Well, it's emblematic of the whole system that has just gone, you know, completely awry. The chargemaster is a two or three or 10,000-item list of a hospital's list prices, or a diagnostic clinic's list prices. And there's no one who - you know, no one can explain how the prices got to be what they are, or justify them. They're just there because hospitals can charge what they want to charge.

So you could pay $77 for a box of $2 gauze pads. You could pay, you know, $10,000 for a CAT scan or a series of CAT scans that Medicare - which pays hospitals their actual costs, plus overhead - might pay a few hundred dollars for.

FLATOW: But people have told me that - who work in the medical community say that, roughly speaking, they use Medicare rates as their guideline. Are you saying this is not true?

BRILL: It's totally untrue. No one - the only one that uses Medicare rates as their guideline is Medicare. I mean, what they make - what they might have meant to tell you was that they take Medicare and - there are some chargemaster prices that are created by taking Medicare and multiplying by five, for example, you know, taking a 500 percent markup on Medicare. But that's the only extent to which I've seen them using Medicare, which is sort of using it in the breach.

FLATOW: Now, you say that in the Affordable Care Act, in Obamacare, there are provisions for coping with, for dealing with these prices, but they're just not in effect yet. Why is that?

BRILL: Well, for starters, I should say that Obamacare does a lot, and already has done a lot to help the very poor get health care by extending Medicaid in those states that have allowed to be extended. However, there was a provision written into the Affordable Care Act - it's on, like, page 707 of the 900-page bill - that goes after hospitals and says that hospitals will lose their nonprofit status from the IRS if they continue to charge people who need financial aid, if they continue to charge them and sue them based on their chargemaster prices, as opposed to the average price that they actually get from insurance companies and from Medicare.

Then again, the difference is, you know, the difference between, you know, $25 for a blood test, versus, you know, $225 for a blood test. And what the new column that I have in TIME this week points out is this one hospital that I just used as an example, Yale-New Haven Hospital, which has recently - the month before last - was suing people, in this case, a warehouse worker, for $6,500 or so for a couple of hours in the emergency room to cleanup some scratches from a bicycle accident, and sued him based on the chargemaster prices.

And it's all because - to answer your question - it's all because the administration literally hasn't gotten around to writing the regulation to implement the law, which they could write in a few hours.

FLATOW: And why is that? Why...

BRILL: Why is it?

FLATOW: Yeah.

BRILL: They say, quote, these things take time. Well, almost four years and they say these things take time. And my point in the article really was that at least in the case of building the website, you can argue that's hard. I mean, it is a very hard, complicated e-commerce website for the health insurance exchanges.

But in the case of writing these regulations, it's not hard and it doesn't cost anything, and it would have saved thousands, if not hundreds of thousands, of people, you know, the heartache of being dunned for bills that are inflated that they can't afford.

FLATOW: So it's just stuff that you're saying is on the backburner and just waiting to happen?

BRILL: You know, I know you're asking an utterly logical question. Those are exactly the questions I asked the Treasury Department official in charge of writing the regulations, an assistant secretary of the Treasury who oversees the IRS, and he said these things are complicated and it takes time.

FLATOW: It takes time is just the answer you're getting.

Yeah. I mean, again, I could, you know, I only took a couple of courses in tax law at law school, but, you know, I think I can write these regulations in a couple hours.

1-800-989-8255 is our number. Let's go to Jim in Tucson. Hi, Jim.

JIM: Hi. How are you? Thanks for taking my call. My comment is that car repair shops and dealerships have been using what they call a rate book for decades, and it's worked out very well. And you can go to a car shop and say my Volvo needs a new motor for its air conditioner, and they look it up in a rate book and they tell you the rate. And that's reasonable and it's - and they all do it. Why can't the hospitals call up a few car shops and find out how they make it work and do what they do?

BRILL: Because they don't have to. They don't have to. They typically don't have competition. Certainly if you show up in the emergency room and you need care, and let's say it's a real emergency and you need care, you're not going to look up from your, you know, from the stretcher you're on and say, oh, by the way, how much does this cost? I think I'll go down the street and see how much they're going to charge.

So in many instances with healthcare, you don't have, you know, that kind of leverage. Second, even where you do, if it's not an emergency, let's say you're getting a, you know, you're getting a, you know, your back repaired with a, you know, a neurostimulator, which was what one of the patients in my Time magazine article had done, your doctor has said, you know, this is the hospital we should use. This is the neurostimulator we should use. You know, it's, you know, it's not like getting a new muffler for your Volvo.

JIM: Well, it is sort of like getting a new muffler for your Volvo except that hospitals don't follow it.

BRILL: That's right. It should be. It absolutely should be. And, you know, there's a transparency movement afoot to force hospitals and device makers and drug companies to be much more transparent. But as I pointed out in the first article I did in Time, the healthcare industry combined spends three times as much as the much-feared military industrial complex when it comes to lobbying in Washington.

So that's why you don't see, you know, those kind of regulations. You know, the point of my article and the point of the stuff I'm writing now is that healthcare isn't like going to an auto repair shop in the sense that it needs more regulation, not less, because the customer, the patient, often has little choice and, even more often has no information.

ADAM: Hi. Thanks for having me on. I work in a large health system, and what we've found is that our previous challenge is actually getting in touch with patients. Every large health system that I worked in actually has a pretty aggressive charity care policy where if somebody lets us know their situation, we're happy to work with them. And in almost every case, we only use court as a last resort if we can't get a hold of somebody.

But if somebody comes in and explains their situation on a case-by-case basis, we're happy to share with them the charity policy, which breaks down costs to actual cost in most cases or based on a percentage ability to pay, in many cases breaks off the charge. So in many cases, we'd like to actually see patients get a hold of us and work with us instead of refusing to return calls or open envelopes.

BRILL: Well, that's true in the case of many health systems. But even in many of those health systems that do have aggressive policies for financial aid, the first bill they send out is their chargemaster bill. And their rationale is, well, let's start the negotiation from, you know, a very high place. And if someone sees a bill for, you know, $6,000 for getting a couple of stitches and a Band-Aid in an emergency room, that's probably not a great encouragement to get the person to come in and negotiate. And that is what most hospitals do.

In fact, it's standard operating procedure. If there's no insurance, we send out this ridiculous bill based on these ridiculous prices that nobody can explain. I'm sure in the health systems you work in, there isn't a single person there who can explain the rationale behind any price on the chargemaster.

FLATOW: Adam, can they?

ADAM: That may be the case on the initial bill. But because it might appear high to somebody, that doesn't obviate their need to work with us. And in most cases when we can get a hold of somebody, we're happy to work with them. So...

BRILL: Well, the other - what this provision of the Affordable Care Act does, if it's ever implemented, is it forces the hospitals to demonstrate to the IRS that their policies are about making people aware of the possibility of being able to get financial aid, are really aggressive and really transparent. And then it says, and if someone qualifies as being in need, the negotiation has to start with the average price the hospital charges. So something - not the ridiculous chargemaster price.

FLATOW: So you're basically saying if we just implement these Affordable Care Act provisions...

BRILL: Yeah.

FLATOW: ...we wouldn't be worrying about this stuff.

BRILL: Well, we wouldn't - well, look, that provision combined more importantly with the provision that, you know, many, many, many more people are going to have health insurance. And also, I should add, many, you know, the people who usually get stuck in this situation are people who have the kinds of insurance policies that the Affordable Care Act is phasing out.

The woman I wrote about at Yale-New Haven Hospital in the article - not the person with the motorcycle accident, but this woman who slipped and fell in her backyard, she thought she had health insurance. But her health insurance was limited to $2,000 per hospital visit. In her case it was a $9,000 emergency bill. So you know, hospital just wouldn't even pay attention to her health insurance, and she got the bill.

That is exactly the kind of an insurance policy that the government has now said, you know, has to be cancelled unless it's grandfathered in because it was already in place. And that's what all the raucous is about. So, you know, that woman, you know, might think, until she gets - ends up in an emergency room, well, I have my insurance. I want to keep my insurance. I like my insurance. But that's really not health insurance.

FLATOW: And a lot of these ills that you're saying could go away if we just wrote some paperwork and implemented the Affordable Care Act.

BRILL: In this particular case.

FLATOW: Yeah.

BRILL: And there's also - as the column in this week's Time explains, there's another provision that they haven't yet written the regulations for. And that would require hospitals, as the earlier caller suggested, to post their chargemaster prices publicly. And they're not because they haven't written the regulation.

And I will tell you that I think that would have a pretty dramatic effect. Because if you required a hospital to, you know, to post the price list that said box of gauze pads, you know, $77, or that the cuff they use to put around your arm when you get a blood pressure test is, you know, is $68, they'd be so embarrassed that they'd have to change the chargemaster.

FLATOW: So do you have any anticipation that the regs are going to be written?

BRILL: Oh, sure. I think they'll be written, especially now that the article is out; I think you'll see those regs pretty quickly.

FLATOW: Mm-hmm. And what's a person to do then when they get a bill that says $6,000 for a couple of stitches? What do you recommend?

BRILL: If you got a bill for $6,000 for a couple of stitches, if you said to that hospital, I'll give you a thousand dollars right now, the hospital would take it very happily and still make money on it, by the way.

FLATOW: Yeah, because one of the eye-opening things you have in your article is about how much money even the nonprofit hospitals are making.

BRILL: Especially the nonprofit hospitals. Not even, especially.

FLATOW: Why is that?

BRILL: Why is that? Because they charge the kinds of prices we've been talking about. And they're not in a real marketplace and, you know, they can call themselves nonprofit. But if their CEO is making, you know, two or three or $5 million a year and everybody else is making a lot of money, then, you know, they look and sound like very profitable corporations.

FLATOW: Mm-hmm. So what's a person to do now? What do we do?

BRILL: Well, I think, you know, beyond the Affordable Care Act - what the Affordable Care Act does, which I think is a very good thing, it offers the prospect of a lot more people having health insurance protection. That's a good thing. But it doesn't do anything to address the kinds of costs we've been talking about. There, I think, you have to look at, you know, tighter enforcement of anti-trust laws for the hospitals that keep consolidating with other hospitals in their community and then buying up all the doctors' practices so that people, including insurance companies, have no leverage when buying, you know, healthcare services in that community. That would be one thing.

The second thing is we probably ought to decide that we don't want to be the only country in the free world, in the developed free world, that doesn't control prescription drug prices. If you grant a drug company a patent on a cancer-curing drug, and it's the only drug you can take to save your life, there has to be some marketplace control on what the company can charge. That doesn't mean they shouldn't make a tremendous profit for having, you know, developed that drug and taken the risk of developing that drug. But they make tremendous profits all over Europe on those drugs, and yet they charge half of what they charge here, sometimes a third of what they charge here.

FLATOW: All right. Steven, we've run out of time. I want to thank you for taking time to be with us today.

BRILL: Happy to do it.

FLATOW: Steven Brill, author of "Bitter Pill: Why Medical Bills Are Killing Us," a special report in Time magazine. He's also the co-founder and CEO of Journalism Online.

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